Africa Oil (TSE:AOI), referred to by management as Meren during its first-quarter 2026 results call, reported what executives described as a strong start to the year, supported by production performance in Nigeria, a refinancing of its reserves-based lending facility and continued dividend payments.
President and CEO Oliver Quinn said the company’s Nigerian assets performed above plan during the quarter, helped by the recovery of the Agbami field following planned maintenance in the fourth quarter of 2025. He said the company also amended its gas sales agreement for Egina and Akpo, securing higher gas prices and an index with some exposure to LNG pricing.
Production Reaches Upper End of Guidance
Meren reported first-quarter working interest production of 28.4 thousand barrels of oil equivalent per day, which Quinn said was at the upper end of full-year guidance. Economic entitlement production was 31,000 barrels of oil equivalent per day, within guidance.
Quinn said Akpo and Egina performed in line with expectations, while Agbami continued ramping back toward anticipated production levels after the completion of maintenance. He said joint venture partners across the three producing assets are preparing to start drilling campaigns in late 2026, with a firm rig contract for Egina and Akpo expected shortly.
Gas Agreement Boosts Revenue
Chief Financial Officer Aldo Perracini said first-quarter EBITDA was $100 million, in line with full-year guidance. Total revenue was $114 million, including $64 million from one oil cargo and $50 million of gas revenue. Of the gas revenue, $41 million was tied to the amended gas sales agreement.
Perracini said the amended agreement secured a higher long-term gas price and included a mechanism to recover a historical pricing differential back to 2020. The company received a cash payment of almost $14 million and recognized a fair value of $27 million related to that recovery mechanism.
The company lifted one cargo in the first quarter at an average all-in realized price of $64 per barrel. Perracini said the cargo was under a forward sales contract with a fixed dated Brent price triggered last year. After the quarter ended, Meren lifted two cargoes in April: one final cargo under the legacy trigger-price mechanism at $64 per barrel and another priced at spot, with an all-in realized sales price of $122 per barrel.
Cash flow from operations before working capital was $79 million, while reported capital expenditures were $9 million. Free cash flow was negative $36 million, primarily due to a $106 million working capital outflow tied to a higher underlift position and a buildup in trade receivables linked to gas revenues. Perracini said full-year guidance was unchanged.
RBL Refinancing Expands Flexibility
Meren ended the quarter with $162 million in cash, down from $175 million at the start of the year. Net debt stood at $208 million, up from $155 million at year-end, partly reflecting a $14 million drawdown on the reserves-based lending facility. Net debt to EBITDA remained at 0.5 times, below the company’s target of 1.0 times.
Perracini said the refinanced RBL includes $600 million of commitments and an accordion feature of up to $1 billion. He said the facility was more than two times oversubscribed, the tenor was extended to six years with a two-year grace period, and the average loan-life margin was reduced by 12.5 basis points.
In response to an analyst question on balance sheet strength, Perracini said the company’s priorities are protecting its organic growth portfolio and maintaining dividend payments. He said it was too early to comment on potential extraordinary distributions for 2026.
Nigeria, Namibia and Equatorial Guinea Updates
Quinn said the Akpo and Egina drilling campaign is expected to begin in late 2026 with the Akpo Far East prospect, which he described as a near-field exploration target with an estimated 150 million barrels of gross unrisked resource. If successful, production would be tied back about five kilometers to existing Akpo infrastructure.
The campaign is expected to shift to infill wells across Akpo and Egina, with first production from those wells expected in 2027. Quinn also said TotalEnergies is expected to drill an appraisal well on the extension of the Egina South discovery on a neighboring block.
At Agbami, Meren expects a drilling program to begin in the fourth quarter with appraisal of the Ikija discovery, followed by a six-well infill campaign through 2027 and into 2028. Quinn said incremental production from the infill wells is expected from early 2027.
In Namibia, Quinn said the Venus project continues to move toward a final investment decision, anticipated in the coming months, with first oil targeted for 2030. He said the operator has completed front-end engineering and design, submitted the field development plan and matured capital costs through competitive EPC bidding. Meren remains fully carried through first commercial production with no financial cap.
During the Q&A, Quinn said operator TotalEnergies has publicly targeted a July final investment decision for the first phase of Venus. He cited a gross FPSO capacity of 160,000 barrels per day and said Meren’s net exposure through its holding is just under 4%, or roughly 6,000 barrels per day, while emphasizing the company’s carried status.
In Equatorial Guinea, Quinn said Meren secured license extensions of up to two years on blocks EG-31 and EG-18. He said there are no significant capital commitments attached to the extensions, aside from regular license holding costs, and that the company continues to pursue farm-down discussions.
Hedging and Capital Allocation
Perracini said Meren’s hedging program for the rest of 2026 is focused on swaps and collars after the legacy trigger-price mechanism ended with the April cargo. He said the company is hedged on “a little bit below 40%” of remaining 2026 production, and between 30% and 35% of lifting volumes over the next 12 months.
Quinn said Meren remains open to inorganic opportunities but will be disciplined, noting that acquisitions must compete with the returns available from the company’s organic portfolio. He said the company’s geographic priority remains the Atlantic margin, and that flowing barrels that scale the business ahead of late-decade organic growth would be attractive if they meet strategic and financial criteria.
“With the business streamlined, the balance sheet strong, we have the optionality to pursue inorganic opportunities where they meet our strategic, financial and operational criteria,” Quinn said.
About Africa Oil (TSE:AOI)
Africa Oil Corp is an international oil and gas exploration company. It is an exploration stage enterprise that participates in oil and gas projects located in emerging markets, in sub-Saharan Africa. The company operates in the business segment of international oil and gas exploration, and geographically, it operates in Kenya and Ethiopia.
